21 F.

3d 427
NOTICE: Sixth Circuit Rule 24(c) states that citation of unpublished dispositions
is disfavored except for establishing res judicata, estoppel, or the law of the case
and requires service of copies of cited unpublished dispositions of the Sixth
Circuit.

FEDERAL KEMPER INSURANCE COMPANY, PlaintiffAppellant,

v.
Dale CALDWELL and Nancy Caldwell, Defendants-Appellees.
WEST VIRGINIA INSURANCE GUARANTY
ASSOCIATION, Intervenor-Appellee,
v.
INDIANA INSURANCE COMPANY, Third-Party Defendant.
No. 93-3126.

United States Court of Appeals, Sixth Circuit.

April 5, 1994.

Before: JONES and BOGGS, Circuit Judges; and FEIKENS, Senior

District Judge.
PER CURIAM.

Federal Kemper Insurance Co. appeals an adverse ruling by the district court on
cross-motions for summary judgment. Federal Kemper's complaint sought a
declaratory judgment as to the scope of coverage of an insurance policy issued
to Dale and Nancy Caldwell. Jurisdiction is predicated upon diversity of
citizenship, and Ohio substantive law applies. For the reasons discussed herein,
we affirm the judgment of the district court.

* Federal Kemper, an Illinois corporation, insures the Caldwells, Nancy and

Dale, who are Ohio citizens. The automobile insurance policy provides, inter
alia, uninsured motorist bodily injury coverage. Christina James (nee
Caldwell), the daughter of Dale and Nancy, specifically was excluded from
coverage under the policy, effective December 23, 1988. The exclusion in the

policy's endorsement states: "It is agreed that such insurance as is afforded by

this policy does not apply with respect to any claim arising from accidents
which occur while any automobile is being operated by CHRISTINA
CALDWELL." The declarations page of the policy states: "This policy does not
provide coverage for: CHRISTINA M. CALDWELL."
3

Christina was operating Dale's car on July 24, 1990, with Nancy as a passenger,
when an accident occurred in Huntington, West Virginia. Teresa A. Albright, a
West Virginia resident and the driver of the car that collided with the
Caldwells' car, was insured by Industrial Fire and Casualty Insurance Co., but
that company was liquidated by Illinois state court in March 1991, making
Albright an uninsured motorist for the accident involved here. Nancy filed a
claim against Federal Kemper for injuries resulting from the car crash, under
the uninsured motorist provision of her policy. Federal Kemper denied those
claims on the ground that the Caldwells' policy affords no coverage in this case
because Christina, a named excluded driver, was operating the vehicle at the
time of the accident.

The West Virginia Insurance Guaranty Association, prompted by the

liquidation of Industrial Fire, intervened as a party-defendant. The Association
guarantees the insurance liabilities of insolvent insurance carriers in West
Virginia. Nancy can file a claim against the Association, but only if all
coverage available under other insurance policies, including the policy issued
by Federal Kemper, is exhausted first. The Caldwells also brought a third-party
complaint against Indiana Insurance Co., the insurer of Christina's husband. All
parties moved for summary judgment. The district court ruled in favor of the
Caldwells and the Association in Federal Kemper's suit against the Caldwells.
In the Caldwells' suit against Indiana Insurance, the district court granted
Indiana Insurance's motion. The Caldwells do not appeal the granting of
summary judgment to Indiana Insurance, and Indiana Insurance is not a party to
this appeal.

The district court determined that there was an ambiguity between the language
of the declarations page and the language in the endorsement. The district court
found it "unlikely" that the Caldwells and Federal Kemper intended to deny
coverage for injuries sustained by Nancy as a result of the negligence of an
uninsured motorist "some years later when her automobile was being operated
by her emancipated married daughter." Given the ambiguity, the district court
construed the policy in favor of the insured, Nancy, concluding that coverage
was not excluded here. The district court also determined that the named driver
exclusion contravened the policy underlying the Ohio uninsured motorist
statute and thus the insurance policy should not be interpreted to deny Nancy

coverage.
II
6

This court reviews the grant of summary judgment de novo. EEOC v.

University of Detroit, 904 F.2d 331, 334 (6th Cir.1990). The material facts of
this case are not in dispute, and, indeed, the parties stipulated to the facts in the
district court. A decision in this case may be made as a matter of law.

The Ohio Revised Code mandates the offering of uninsured and underinsured
motorist coverage to the same extent that coverage for automobile liability is
provided. Ohio Rev.Code Sec. 3937.18. However, the insured may reject such
coverage or opt for a lower amount of coverage. Ibid. There is no dispute here
that Albright is, because of Industrial's liquidation, an uninsured motorist. The
issue is whether the Caldwells rejected uninsured motorist coverage in their
policy.

Under Ohio law, insurance policies are interpreted using rules of construction
and interpretation applicable to contracts generally. Nationwide Ins. Co. v.
Tobler, 80 Ohio App.3d 560, 563 (1992). The construction of a written contract
is a matter of law. Nationwide Ins. Co. v. Johnson, 84 Ohio App.3d 106, 108
(1992). Words and phrases are to be given their ordinary meaning, unless
something in the contract indicates a contrary intention. Tobler, 80 Ohio
App.3d at 564. "[W]here the provisions of a contract of insurance are
reasonably susceptible of more than one interpretation, they will be construed
strictly against the insurer and liberally in favor of the insured." Ibid.

With respect to Sec. 3937.18, the " 'uninsured motorist statute should be
construed liberally in order to effectuate the legislative purpose that coverage
be provided to persons injured through the acts of uninsured motorists.' " Ady
v. West Am. Ins. Co., 69 Ohio St.2d 593, 598 (1982) (quoting Curran v. State
Auto. Mut. Ins. Co., 25 Ohio St.2d 33, 38 (1971)). Ady reviewed the purposes
underlying the uninsured motorist statute, stating that it was " 'designed to
protect persons injured in automobile accidents from losses which, because of
the tort-feasor's lack of liability coverage, would otherwise go uncompensated,'
" id. at 595 (quoting Abate v. Pioneer Mut. Cas. Co., 22 Ohio St.2d 161, 165
(1970)), and " 'to place the injured policyholder in the same position, with
regard to the recovery of damages, that he would have been in if the tortfeasor
had possessed liability insurance.' " Ibid. (quoting Bartlett v. Nationwide Mut.
Ins. Co., 33 Ohio St.2d 50, 52 (1973)). The Ohio Supreme Court justified its
construction of Sec. 3937.18 by noting that the "cost of this broad coverage is
passed on to all insured drivers as a necessary means of achieving the public

policy of protecting persons from losses due to uninsured motorists." Id. at 599.
10

Given the strong public policy favoring uninsured motorist coverage, for a
rejection of such coverage to be held valid, it must be "express" and "overt."
Abate, 22 Ohio St.2d at 161, 163; Grange Mut. Cas. Co. v. Volkmann, 54 Ohio
St.2d 58 (1978). The rejection or exclusion should be "conspicuous so that a
customer is aware of its existence [and] should be clear and easily understood
by a lay person. Also there should be evidence that the customer agreed to the
restriction on coverage." Ady, 69 Ohio St.2d at 597. Where uninsured motorist
coverage is not expressly rejected, provisions that "purport to reduce the
amount of [uninsured motorist insurance] recovery are unenforceable as against
public policy." Bartlett, 33 Ohio St.2d at 50; Grange, 54 Ohio St.2d at 63. If the
coverage is not expressly rejected, it may not be eliminated by other means in
the insurance contract. See Westerheide v. State Farm Ins. Cos., 86 Ohio
App.3d 557, 561 (1993) ("Unless the insured expressly rejects uninsured
motorist coverage, it is provided for the insured by operation of law."). The
exclusion must "comply with the purpose of [the] statute." Ady, 69 Ohio St.2d
593.

11

In State Farm Auto. Ins. Co. v. Alexander, 62 Ohio St.3d 397 (1992), the Ohio
Supreme Court declared that "[a]n automobile insurance policy may not
eliminate or reduce uninsured or underinsured motorist coverage, required by
[Sec.] 3937.18, to persons injured in a motor vehicle accident, where the claim
or claims of such persons arise from causes of action that are recognized by
Ohio tort law." See also Bartlett, 33 Ohio St. at 53 ("Private parties are without
power to insert enforceable provisions in their contracts of insurance which
would restrict coverage in a manner contrary to the intent of the statute."). The
Ohio Supreme Court recently confirmed its interpretation of Sec. 3937.18 in
Alexander in Stanton v. Nationwide Mut. Ins. Co., 68 Ohio St.3d 111 (1993),
holding that an exclusion in the uninsured motorist coverage of an automobile
liability policy that states that uninsured motorist coverage does not apply to
the use of any motor vehicle by an insured to carry persons or property for a fee
is unenforceable.

12

The issue in this case is whether the endorsement in the Caldwells' policy
constitutes an express rejection of uninsured motorist coverage. The district
court found an ambiguity between the exclusionary language on the
declarations page and the exclusionary language in the endorsement; the district
court therefore construed the policy not to exclude uninsured motorist
coverage. However, even if there is no ambiguity between the two, the
exclusionary language in the endorsement does not on its face exclude
uninsured motorist coverage. In light of the Ohio courts' extremely strong

policy with respect to the clarity and explicitness required for a rejection of
such coverage to be effective, the uninsured motorist coverage was not rejected.
13

As an Ohio court of appeals has noted, the "insurer's burden [of showing
rejection of uninsured motorist coverage] is generally met by showing that the
customer signed a separate provision rejecting equivalent amounts of uninsured
motorist coverage, that the language in the provision was clear and
conspicuous, and that the signature was not the result of restraint, disability or
misunderstanding." Sachs v. American Economy Ins. Co., 78 Ohio App.3d 440,
447 (1992). In Sachs, the insurer provided a form, entitled
"Uninsured/Underinsured Motorists Coverage Reduction/Rejection Form," to
the insured to complete. The court held that summary judgment was
inappropriate because there was a factual dispute as to whether the insured had
completed the form. No such form was completed in this case.

14

In Ullrich v. Auto-Owners Ins. Co., 81 Ohio App.3d 196, 197-98 (1991), an

Ohio court of appeals held that an exclusion was sufficiently clear to be valid;
the exclusion was detailed under a section of the contract entitled "Uninsured
Motorist Coverage." Here, in contrast, in the "Uninsured Motorists Coverage"
section of the Caldwells' Federal Kemper policy, the "Exclusions" are as
follows:

15

A. We do not provide Uninsured Motorists Coverage for bodily injury

sustained by any person:

16While occupying, or when struck by, any motor vehicle owned by you or any
1.
family member which is not insured for this coverage under this policy. This
includes a trailer of any type used with that vehicle.
17If that person or the legal representative settles the bodily injury claim without
2.
our consent.
18While occupying your covered auto when it is being used to carry persons or
3.
property for a fee. This exclusion does not apply to a share-the-expense car pool.
4. Using a vehicle without the permission of the owner to do so.
19
20

B. This coverage shall not apply directly or indirectly to benefit any insurer or
self-insurer under any workers' compensation, disability benefits or similar law.

21

(Emphasis in original.) None of these provisions applies to the facts in Nancy's

case. In addition, the uninsured motorist coverage section appears to be a

standard form, suggesting that there was no negotiation or bargaining as to

excluding any uninsured motorist coverage.
22

Federal Kemper relies on several unreported decisions from Ohio courts of

appeals in arguing that the named- driver exclusion in the Caldwells' policy
should be held valid and enforceable here. However, those cases are not
persuasive inasmuch as they were decided before Alexander, rely on authority
explicitly overruled by Alexander (i.e., Dairyland Ins. Co. v. Finch, 32 Ohio
St.3d 360 (1987) (reasonable exclusionary clauses valid)), or are unpublished.
The Ohio Supreme Court has made clear that an insurer may not easily override
the policy underlying Sec. 3937.18 through exclusionary language in an
insurance policy. We are bound by the Ohio Supreme Court's interpretation of
Sec. 3937.18 in this case, however harsh or contrary to normal contract law that
result may be. Erie R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 822
(1938).

III
23

The judgment of the district court is AFFIRMED.